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Main Government and Public Sector Social Studies Price consciousness and financial services
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Price consciousness and financial services

DateJun, 2005
Pages79
Price / format$2795 / Online Download
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Abstract:
 Introduction
73 per cent of all consumers in Europe and the US are moderately to highly price conscious in all their consumption behaviors and attitudes. This report outlines key trends and insights which will give financial services providers the ability to effectively target price conscious consumers in all their key markets.

Scope
Data from an exclusive Datamonitor survey of over 3000 consumers in France, Germany, Italy, the Netherlands, Spain, Sweden, the UK and the US
In-depth analysis of data covering price conscious consumers' attitudes and behaviours, broken down by region and age
Data and analysis from secondary research on income and expenditure in the US and Europe
Focussed research into industry strategies highlighting existing approaches and future opportunities for financial services providers
Highlights
Across Europe and the USA consumer attitudes to banks contrast sharply with attitudes to utilities suppliers. Across all eight countries, an average of 51 per cent of consumers rated service the priority when choosing a bank whereas only 20 per cent did so in the case of utilities.

In seven of the eight markets analyzed, convenience consumers show a preference for buying all of their insurance products as part of a single package from an insurance provider.

Bargain hunters are so determined to get the lowest prices that they are far more likely to switch to a cheap unrecognized brand than the other consumers in Europe and the US are.

Reasons to Purchase
Understand the size and scope of opportunities to target price conscious consumers in both the US and Europe
Improve acquisition and retention rates by gaining a detailed understanding of the impact of price consciousness on consumers' behaviours
Design innovative products by learning of gaps in the market where existing strategies are not meeting the needs of price conscious consumers



Table of contents:
 TABLE OF CONTENTS
CHAPTER 1 EXECUTIVE SUMMARY 3
Introduction 3
The future decoded 3
Price consciousness is in flux, with age and geographic location playing a key role 3
Expenditure on housing, food and transport takes the biggest slice out of Europeans’ budgets 3
Payment methods and propensity to pay is changing across Europe and the US 4
Cost is the key dynamic for consumers but attitudes to price are diverse and complex 4
Time is money, and consumers are willing to pay for convenience, quality and specificity 4
Although consumers want low cost products, a growing consumer subgroup want cheap branded goods that will elevate their status 4
‘Rich’ does not always mean ‘high-spender’: there are many affluent people who will shop around for bargains 5
Action points 5
CHAPTER 2 INTRODUCTION 15
What is this report about? 15
Who is the target reader? 15
How to use this report 15
CHAPTER 3 THE FUTURE DECODED 17
Introduction 17
Trend: Price consciousness is in flux, with age and geographic location playing a key role 17
Datamonitor classifies respondents as high, low or moderately price conscious 17
Swedish and Dutch consumers are more price sensitive than Italians 19
Age indicates price sensitivity better than gender - male and female 24-35 year-olds are the most price conscious 22
Trend: Expenditure on housing, food and transport takes the biggest slice out of Europeans’ budgets 23
Share of wallet is not a simple predictor of attitude to price and payment 24
Trend: Payment methods and propensity to pay is changing across Europe and the US 25
Online billing and direct debit are becoming increasingly popular 26
Consumers prioritize payments to financial services providers 27
Younger consumers are more likely to delay the payment of financial services bills 28
Insight: Cost is the key dynamic for consumers but attitudes to price are diverse and complex 30
Money talks: price is the priority in four key industries 30
While the choice of electricity or gas supplier depends on price, banks are chosen foremost on the basis of service 31
Insight: Time is money and consumers are willing to pay for convenience, quality and specificity 34
Family time is a priority, but as lifestyles get busier, values are increasingly compromised 34
Time-saving products are often high quality and expensive, yet serve as welcome antidotes to hectic lifestyles 35
There are high proportions of convenience consumers in Sweden and the UK, but not in France, Spain or Holland 37
Convenience consumers want less stress and more time but are willing to experiment to find the right tailored product 39
Convenience customers expect to be rewarded for their loyalty to financial services providers and prefer to avoid the hassle of switching 41
Although convenience consumers switch less, their loyalty depends on getting good service and competitive prices 42
In an effort to keep life simple, convenience consumers prefer packaged products from insurance providers 44
Financial services providers must be careful not to assume that convenience consumers’ behaviors are static 45
Insight: Although consumers want low cost products, a growing consumer subgroup wants cheap branded goods that will elevate their status 47
Low earners enjoy luxurious or prestigious indulgences yet stay within budget 48
Attitudes to brand provide further evidence of the masstige phenomenon 49
In percentage terms, masstige populations are largest in Holland, Sweden, France and the US, and smallest in Spain and the UK 50
Despite being brand sensitive, masstigers seek customization and welcome extensive product offerings 51
Masstige consumers choose to save in some areas to fund spending in others 53
Young and old masstige consumers are more likely to switch financial services providers, but brand orientation influences decision 54
Masstigers may be very willing to walk, but at the same time they expect to be rewarded for their loyalty to financial services providers 56
Insight: ‘Rich’ does not always mean ‘high spender’: there are many affluent people who will shop around for bargains 57
Low and high earners alike seek value for money across all industries 59
There are enough bargain-hunters to warrant attention from retailers, but not from sectors where marketing is less precise 60
Despite being high earners, these affluent consumers are hungry for bargains, not indulgences 61
Bargain-hunters are also less concerned with brand 62
Bargain-hunters are more likely to switch than the rest of the population 63
Bargain-hunters seek financial services providers with a competitive price rather than a strong brand 64
Although they are prone to switching, bargain-hunters do expect loyalty rewards from their financial services providers 65
Insights show the plethora of price conscious groups that financial services providers can target 67
CHAPTER 4 ACTION POINTS 68
Introduction 68
Make competitive pricing a priority to acquire and retain consumers 68
Companies must be proactive about price innovations… 68
…but they must also react to competitor innovations 69
Design marketing strategies around price to maintain and increase the customer base 70
Develop and implement loyalty schemes to acquire and retain consumers 71
Credit card providers have already been implementing loyalty schemes 72
CHAPTER 5 APPENDIX 74
Supplementary data 74
Definitions 75
Research methodology 76
Future readings 77
Report writing team 77
Datamonitor’s custom research capabilities 77


LIST OF TABLES
Table 1: Number of adults in each price consciousness band in each of the eight countries surveyed, 2004 19
Table 2: Average European household expenditure and estimated propensity to pay for different elements of the budget, 2001 25
Table 3: The number of adult convenience consumers in each of the eight countries surveyed, 2004 39
Table 4: The number of adult masstige consumers in each of the eight countries surveyed, 2004 50
Table 5: The number of adult convenience consumers in each of the eight countries surveyed, 2004 61
Table 6: Importance of factors to consumers when choosing a bank, by country 74
Table 7: Importance of factors to consumers when choosing a bank, by country 75


LIST OF FIGURES
Figure 1: 53 per cent of respondents (2,654) were rated moderately price conscious 18
Figure 2: Dutch and Swedish consumers are the most price conscious in Europe and the US 20
Figure 3: Although both nations are price conscious, Swedish consumers are financially prudent, while Dutch consumers are much less cautious 21
Figure 4: On average, 25-34 year-olds are the most price conscious, with sensitivity reducing with age 23
Figure 5: European consumers spent the most on housing, food and transport in 2001 24
Figure 6: While the use of automated and online payment is growing in popularity, around half of US consumers in 2004 had not tried either 27
Figure 7: Consumers in the UK do not delay payments to financial services providers 28
Figure 8: The older the consumer, the more sensible their approach to managing finances 29
Figure 9: Price is predominantly the most important factor when choosing a service provider 31
Figure 10: Banks are chosen on the basis of service, but price matters most when choosing a utility 32
Figure 11: Both price and brand influence switching behavior 33
Figure 12: People see simpler lifestyles as the key to having more family time, but find this hard to achieve 35
Figure 13: If people pay extra for time-saving products, they are also more likely to indulge to escape daily pressures 36
Figure 14: Italian, Swedish and American consumers are more willing to pay extra for time-saving products 38
Figure 15: The convenience consumer is keen to experiment, de-stress and differentiate 40
Figure 16: As part of their strategy to obtain effective service and tailored products, convenience-driven consumers value the recommendations of family and friends 41
Figure 17: Convenience-driven consumers expect to be rewarded for loyalty to financial services providers and see switching as troublesome 42
Figure 18: Across Europe, convenience consumers are more likely to complain than switch, although their switching rates are still significant 43
Figure 19: Convenience consumers prefer to buy all their insurance products in one package from their provider 44
Figure 20: Convenience consumers have historically been less inclined to switch financial services providers 45
Figure 21: Convenience consumers may not have switched in the past, but their attitudes to switching are changing 46
Figure 22: German consumers grapple for a piece of haute couture whilst Habitat commissions Manolo Blahnik 47
Figure 23: Indulgence: there is very little variation between high and low income groups 48
Figure 24: With the exception of the 65+, age group has little influence on brand sensitivity 49
Figure 25: Just the look - Jasper Conran range at Debenhams 51
Figure 26: Despite being highly brand sensitive, masstigers also value tailored products and service 52
Figure 27: Masstigers are more likely to purchase on credit than other consumers 54
Figure 28: Masstigers are more likely to switch than the average consumer 56
Figure 29: Masstigers expect to be rewarded for their loyalty, especially the young and old 57
Figure 30: Target Corporation in the US achieved revenue growth well above the industry average in 2004 58
Figure 31: Across nations income does not dictate price sensitivity and in France, Italy, Sweden and Britain high earners are more price conscious than low earners 60
Figure 32: The well-heeled bargain-hunter is less likely to indulge; one of the manifestations of the highly price conscious nature 62
Figure 33: Despite having the money to invest in brands, this segment is unconcerned with the cachet behind the name 63
Figure 34: Young, wealthy bargain-hunters are most likely to switch, while middle-aged masstigers have a switching rate similar to the overall average 64
Figure 35: Impervious to the influence of brands, the well-heeled bargain hunter is enticed by savings rather than rep 65
Figure 36: On the whole, bargain hunters generally want to rewarded more than the average con 66
Figure 37: Capital One continues to innovate in the credit card market with rock-bottom interest charges on balance transfers and purchases 69
Figure 38: MORE TH>N’s website is very successful at advertising all the savings and discounts that the company has to offer 71
Figure 39: The Nectar card is an example of a multi-retailer coalition which financial services providers can look at creating to improve customer retention and acquisition 73
Figure 40: Datamonitor’s core consulting capabilities 79




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